The following paper will provide an overview on the importance of the regional union of Balkans countries before joining European Union. Initially the paper will describe the main forms of integration and the main benefit for each of them. Furthermore, the paper will explain the main barriers of political integration of the Albania, Macedonia, Kosova and Montenegro. The essay will be based in the daily political development of the region and the theory given from deferent scholars of economics and business.
Regional integration principles Regional alliances to promote liberalization trade are important features in the second half of the 20th century. Today there are close to 100 agreements although not all of them have a practical implementation. Countries are trying to integrate their economies and open to new markets for their domestic firms and lower prices for their customers. According to Lundby & Jeffrey (2010), the characteristics of most important of international business are the extent of economic integration among the member countries.
The economic integration affects exporting and investment opportunities among members and non-member countries. According to Warne &Nicholas (2005), there five different economic integration like free trade area, custom union, common market, economic union and political union. Following Bennett (2002), free trade area eliminates trade barriers among member countries like the NAFTA agreements between Canada, Mexico and United state. Custom union refers to the elimination of the trading barriers among members with common external trade policies for non-member countries.
The best example of the custom union is the agreement between Argentina, Brazil, Paraguay and Uruguay. According to Gelfand, & Brett (2004), common union has the same characteristics as the custom union with the additional element the elimination of the barriers that inhibit the movement of production factors labor, capital and technology among members. Economic union represents full integration among countries. It includes the common union integration with additional economic policies integration among members. The best example of economic integration is the European union.
The last form of integration is the political integration where countries follow a full political and economic integration. The best example of political union is the united state of America. Regional integration between Albania, Montenegro, Kosova and Macedonia. Albania has a favorable geographical position since it links the west developed Europe with the postcommunist European countries, East Europe. According to INSTAT (2009), Albanian population is close to 2. 8 million inhabitants. Neighbor countries are Montenegro with 0. 7 million inhabitants; Kosova with 1.
8 million inhabitants; Macedonia with 2 million inhabitants. All these countries separately are not attractive from global companies because of their small size. According to Krishna (2005), economic integration or trade blocs are preferential trade agreements between numbers of countries to reduce or completely remove the barriers between members. Trade blocs increase the market power for each of the trading members. It increases productivity and companies take advantage of economies of scale. Also, it increases the competition between members of the market.
Low costs will make the member countries firms more competitive in the non-member countries market. Small countries are the ones who take more advantage from the trading blocs than the large members of the agreement, by opening their product to a larger market. Companies take the decision to expand the business in foreign countries by considering the trading blocs and its main benefits. However, elimination of the trade barriers exposes the firm’s home market to competition of other member and non-member countries, thus threatening the less efficient firms.
A regional economic integration attracts the foreign investments from non-member countries as firms outside the bloc seek the benefits of insider status by establishing manufacturing facilities within the bloc. In order for these countries, to attract global companies and increase the foreign direct investments needs and economic integration among all countries and effectively make them one country. Integration of Albania, Montenegro, Kosova and Macedonia will create a market of 6. 2 million customers.
Also, the integration will standardize the import and taxation policy toward the non-member countries by eliminating the differences among countries. According to Yoshino & Rangan (1995), economic integration and opening to new markets there are challenges like differences in culture, political and economic environment, and regulation between countries. Cultural and economic changes product customization. In case of the economic integration between Albania and its neighbor countries, there are limited cultural differences. All countries have almost the same philosophy of the living, tradition and customs.
The similarities between countries will help companies to minimize their costs by using the same brand, same advertising strategy and message across markets. Furthermore, countries show similarities in the economic situation. They are all low-income countries with the same needs and resources to accommodate those needs. This situation increases the demand for fast moving goods by representing big opportunities for global companies operating in these industries. There is not much to say about legal restriction since they do not exist.
Legal and regulatory framework is in favor of foreign investment in the region. Typically, each form of economic integration confers benefits on the national economy but hurts particular sectors and communities within that economy. As a result, negotiating any form of the economic integration is not easy. According to Koyuturk et al. (2012), strategic alignments within a company are production, marketing, financial and research and development alliances. Production alliances happen when two different companies create a joint venture to produce a common product or facility.
Marketing alliances between companies consist in sharing of the marketing services or consultancies. Financial alliances consist in sharing the risk of investment with other partners. R&D alliances refer to joint research with partners for developing new product or services. The above strategic alignment can be managed through shared management agreements where all the involved parties participate in the shared agreement fully and actively. Strategic alignments will decrease the company cost but will have an issue for the employees.
Therefore, sharing of some of the functional services many companies will cut their labor force. Local government should create defense policies to mitigate the risks of the integration. Also, political instability, high level of corruption and previous conflicts are the most difficult integration barriers. The suggested form of integration that will strengthen the position of these countries in the region and drive a competitive advantage is the political integration. It relates to cooperation between states and formation of state based regime.
Also, it refers to the constitution of new political entities with a certain degree of independent from the individual states. Regional integration strengthens the political system the scope and the capacity of its decision making process. Furthermore, legal integration it is closely related to the political integration and involves the establishment of common legal rules and common legal systems for citizens of different states. The disadvantages of regional integration are, to begin with that to achieve it, you must sacrifice some degree of sovereignty.
This could negatively affect conflict resolution. This loss of flexibility in creating solutions to problems is a huge disadvantage. Conclusion Following the main forms of integration the political integration is the most efficient one for the analyzed countries. Political integration of Albania, Kosova, Macedonia, and Montenegro will create new opportunities for these countries. It will increase the market power for each of the trading members and increase productivity and companies take advantage of economies of scale.
Also, it increases the competition between members of the market. Lower costs for the member countries will make the member countries firms more competitive than the non-member countries market. Also, regional integration allows strategic alignments within a company in production, marketing, financial and research and development alliances. However, the political integration will strengthen the position of these countries in the region and drive a competitive advantage for the group of countries.
Cite this European Integration
European Integration. (2016, Jul 20). Retrieved from https://graduateway.com/european-integration-2/